Thai central bank unexpectedly cuts rate 25 bps to record low 1.0%

By Orathai Sriring and Kitiphong Thaichareon

 

FILE PHOTO: The Bank of Thailand logo is seen in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva/File Photo

 

BANGKOK (Reuters) - Thailand's central bank unexpectedly cut its benchmark interest rate for a third time in six months on Wednesday, taking it to a record low as a virus spreading from China puts further pressure on the struggling economy.

 

The Bank of Thailand's (BOT) monetary policy committee voted unanimously to cut the one-day repurchase rate <THCBIR=ECI> by 25 basis point to a fresh record low of 1.0%, the lowest in Asia outside of Japan.

 

"The Committee viewed that the Thai economy would expand at a slower rate in 2020 than previously forecasted and much further below its potential," the MPC said in a statement.

 

The virus outbreak, a drought and a delay in passing the fiscal budget would affect a large number of businesses and employment, it said.

 

Analysts say potential growth shocks emanating from China are raising the chances of further central bank policy easing in Asia.

 

The Bank of Japan's deputy governor said earlier on Wednesday that it stands ready to ramp up stimulus if the economy is derailed, while several others have said they are closely monitoring the situation. The Philippines is expected to lower borrowing costs on Thursday.

 

Thailand is considered one of the most vulnerable economies in the region to the virus due to its heavy reliance on Chinese tourists and China trade.

 

The unanimous decision to cut the rate "underscores the severity and urgency of economic challenges," said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.

 

Charnon Boonnuch, an economist at Nomura in Singapore, said he expected the BOT to pause after three rate cuts of 75 basis points in this cycle.

 

"However, we see some room for more easing this year if growth continues to disappoint. There is still some room for the BOT to cut," he added.

 

In a Reuters poll, 14 of 23 economists had predicted no rate change on Wednesday while the others forecast a quarter-point cut.

 

The BOT had cut the rate by a quarter-point each in August and November but left it unchanged in December.

 

Titanun Mallikamas, secretary of the BOT's monetary policy committee, told a news conference that the economy was expected to grow less than the forecast 2.8% this year.

 

Thailand's growth VS regional peers -

 

Thailand's Policy rate, GDP and CPI -  

Tourism in particular will likely be much slower than expected, he said.

 

Titanun did not answer when asked whether there was room to cut rates further.

 

The virus outbreak - which has sickened thousands in China and killed nearly 500 people - has compounded problems for Southeast Asia's second-largest economy as its exports have been weak amid global trade tensions.

 

Revenues from tourism, another key growth driver, are expected to plummet after China banned tour groups from leaving the country to contain the spread of the disease.

 

Thailand may see 2 million fewer Chinese tourists than last year's 11 million, according to the Tourism Authority of Thailand. China is Thailand's biggest source of tourists, making up 28% of the total last year.

 

A joint standing committee of industry, banking and commerce said on Wednesday the country's tourism earnings may tumble by 108 billion baht to 220 billion baht ($3.47 billion-$7.08 billion) if the outbreak lasts for 3-6 months.

 

It also slashed its 2020 economic growth forecast to 2.0%-2.5% from 2.5%-3.0% projected last month.

 

In addition, some investments have been stalled due to delays in the 3.2 trillion baht budget, which is now pending a court ruling on its validity.

 

(Additional reporting by Satawasin Staporncharnchai; Editing by Kim Coghill)

 

 

-- © Copyright Reuters 2020-02-05

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MPC lowers policy rate amid negative factors

By THE NATION

 

 

The Monetary Policy Committee (MPC) of the Bank of Thailand voted unanimously to cut the policy rate by 0.25 percentage point from 1.25 per cent to 1 per cent, effective immediately, at its meeting on Wednesday (January 5), said central bank's assistant governor Titanun Mallikamas.

 

He added that the reduction was in line with MPC's estimate that Thai economy growth would be lower than its previous forecast, due mainly to the new coronavirus outbreak, delay of the 2020 fiscal budget disbursement and drought.

 

The Joint Standing Committee on Commerce, Industry and Banking has revised downward the country's gross domestic product (GDP) growth this year to between 2 per cent and 2.5 per cent from the previously projection of 2.5 to 3 per cent, according to its statement on January 5.

 

Source: https://www.nationthailand.com/business/30381632

 

-- © Copyright The Nation Thailand 2020-02-05

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I suspect that another .50 cut will come when the adjustable rate (and negatively amortized) mortgages start to recast and reset.

But the PM only a few days back reassured everyone that the Corona Virus is under control

God Luv Him

..and immediately after  the cut....the baht rises against the dollar...SMH

This is a good move and should help to weaken the THB.

53 minutes ago, Berkshire said:

This is a good move and should help to weaken the THB.

The opposite happened today according the the Bangkok Bank, amazing Thailand.

2 hours ago, Berkshire said:

This is a good move and should help to weaken the THB.

I had a look today here for the GBP/THB TT rates. Just look at the number of rate changes today.

 

https://daytodaydata.net/default.aspx   GBP

 

https://daytodaydata.net/default.aspx   USD

 

 

10 hours ago, rayluttman said:

The opposite happened today according the the Bangkok Bank, amazing Thailand.

The move was in response to Malaysia's 1/4% cut some 2 weeks ago, which is why the market did the opposite.

 

NZD interest rates are up next week and a movement there, should have one on the THB.

Cutting the already low rate again is not helping anything .

It will drive wealthy customers away , that's all . In Malaysia I get 4 % on a fixed and guaranteed account .

Bye bye Thailand .

17 hours ago, webfact said:

BANGKOK (Reuters) - Thailand's central bank unexpectedly cut its benchmark interest rate for a third time in six months on Wednesday, taking it to a record low as a virus spreading from China puts further pressure on the struggling economy.

Panic mode.

5 hours ago, mshs said:

The move was in response to Malaysia's 1/4% cut some 2 weeks ago, which is why the market did the opposite.

 

NZD interest rates are up next week and a movement there, should have one on the THB.

Why would New Zealand's central bank rate have an effect on THB, because you wish it to be so?

Certainly not weakened the Baht which is what I would have expected. Very range bound around 31 dead currently....

10 minutes ago, hotchilli said:

Panic mode.

Nonsense, a simple measured response

6 minutes ago, Chivas said:

Certainly not weakened the Baht which is what I would have expected. Very range bound around 31 dead currently....

USD has been strengthening because of the impeachment trial so that has probably offset any action by BOT.

 

https://www.marketwatch.com/investing/index/dxy

15 hours ago, billd766 said:

17 hours ago, Berkshire said:

This is a good move and should help to weaken the THB.

 

15 hours ago, billd766 said:

I had a look today here for the GBP/THB TT rates. Just look at the number of rate changes today.

 

https://daytodaydata.net/default.aspx   GBP

 

https://daytodaydata.net/default.aspx   USD

 

 

Trends are more important than day-on-day numbers. Have a look at the graphs on XE.com. It can be seen that there is a steady rise in the pound since the election And that rise applies when viewed against both the THB and the USD, so it is the pound that's moving rather than the Baht

 

And if the UK/EU trade talks bear fruit it should rise some more. There's hope for us Brits yet

 

Go for it BJ.

 

https://www.xe.com/currencycharts/?from=GBP&to=THB&view=1Y

2 minutes ago, Moonlover said:

 

Trends are more important than day-on-day numbers. Have a look at the graphs on XE.com. It can be seen that there is a steady rise in the pound since the election And that rise applies when viewed against both the THB and the USD, so it is the pound that's moving rather than the Baht

 

And if the UK/EU trade talks bear fruit it should rise some more. There's hope for us Brits yet

 

Go for it BJ.

 

https://www.xe.com/currencycharts/?from=GBP&to=THB&view=1Y

Here's a better view, 5 August seems to have been the turning point.

 

https://www.poundsterlinglive.com/data/currencies/gbp-pairs/GBPTHB-exchange-rate/

16 minutes ago, saengd said:

Here's a better view, 5 August seems to have been the turning point.

 

https://www.poundsterlinglive.com/data/currencies/gbp-pairs/GBPTHB-exchange-rate/

Just after BJ became PM. Interesting. Nice graph that. Thanks.

Not enough rate cut. And too much Chinese tourists. Any questions?

3 hours ago, nobodysfriend said:

Cutting the already low rate again is not helping anything .

It will drive wealthy customers away , that's all . In Malaysia I get 4 % on a fixed and guaranteed account .

Bye bye Thailand .

And the depreciation of the RM against the THB in the past year - 4%. 

19 hours ago, tonray said:

..and immediately after  the cut....the baht rises against the dollar...SMH

 

When I checked rates earlier this morning USD was higher against the ThB than on Tuesday. 

 

But for me the GBP had weakened against the USD so no great effect on the GBP/ThB rate.

20 hours ago, Berkshire said:

This is a good move and should help to weaken the THB.

you said 'should" but when because it (baht) keeps fluctuating as it has been doing for the past couple months

58 minutes ago, Mavideol said:

21 hours ago, Berkshire said:

This is a good move and should help to weaken the THB.

you said 'should" but when because it (baht) keeps fluctuating as it has been doing for the past couple months

It seems some of you guys expect the THB to tank immediately.  It doesn't work that way.  There are a lot of other variables that impact the currency exchange rate, including what's going on in other countries.  If the USA were to cut rates again, that would tend to weaken the USD so it'd be a wash with the THB.  But again, other variables.  A cut in rates in Thailand should, for example, result in less foreign currency entering the Thai stock and bond market, which should weaken the THB.    

11 minutes ago, Berkshire said:

It seems some of you guys expect the THB to tank immediately.  It doesn't work that way.  There are a lot of other variables that impact the currency exchange rate, including what's going on in other countries.  If the USA were to cut rates again, that would tend to weaken the USD so it'd be a wash with the THB.  But again, other variables.  A cut in rates in Thailand should, for example, result in less foreign currency entering the Thai stock and bond market, which should weaken the THB.    

Last years outflows from the SET were some of the largest in SET history:

 

https://www.nationthailand.com/business/30349052

19 hours ago, saengd said:

Why would New Zealand's central bank rate have an effect on THB, because you wish it to be so?

Wishes were horses....

So I do not wish estrogen comports with large numbers, distance/time, logic....

It is what it is.

 

And what it is that auto-plants have enjoyed subsidies since the floods.  Profits that would have been repatriated to Nippon and arbitraged to Kiwi are now arbitraged to THB.

 

NZD rates are the same as the THB rates following the 1/4% cut.

 

If the NZD rates rise or incline to rise, the tax-holiday THB may decide to switch back to NZD arbitrage of the past.

 

The auto-plants in Siam do not want the THB to drop, since they are holding it, for roughly the past decade.

They might even have leveraged it, so essentially they might have 3 to 5 times the THB to "protect".

 

 

12 minutes ago, mshs said:

Wishes were horses....

So I do not wish estrogen comports with large numbers, distance/time, logic....

It is what it is.

 

And what it is that auto-plants have enjoyed subsidies since the floods.  Profits that would have been repatriated to Nippon and arbitraged to Kiwi are now arbitraged to THB.

 

NZD rates are the same as the THB rates following the 1/4% cut.

 

If the NZD rates rise or incline to rise, the tax-holiday THB may decide to switch back to NZD arbitrage of the past.

 

The auto-plants in Siam do not want the THB to drop, since they are holding it, for roughly the past decade.

They might even have leveraged it, so essentially they might have 3 to 5 times the THB to "protect".

 

 

An interesting and useful perspective, thank you!

 

Any feel for the size of the numbers involved?

 

On 2/5/2020 at 3:02 PM, webfact said:

Thai central bank unexpectedly cuts rate 25 bps to record low 1.0%

Six months too late while BOT tried other futile measures to slow capital flight out of Thailand while preserving SET growth while admittedly sacrificing the export sector. For several years the BOT has sought in practicality to protect the reputation of the Prayut regime's economic policies ironically at the expense of the economic welfare of the people.  

On 2/5/2020 at 3:02 PM, webfact said:

Thailand's growth VS regional peers -

"Thailand's growth has lagged most regional peers for years"

Those years being the entire duration of the Prayut military regime versus the three regional democratic economies! This reflects in part Prayut's true focus - advance the military strength (stranglehold ?).

• "in the five years the PM has been in power, total spending has hit 14.3 trillion baht, with loans of 2.2 trillion baht, without any significant growth in the economy." https://thethaiger.com/hot-news/politics/opposition-hits-out-at-governments-military-spending-in-2020-budget
• The Thai military during those five years spent of about 1 trillion baht, or 7% of the fiscal budget. https://www.thaipbsworld.com/tag/one-trillion-baht/ 
• 

Clearly, under the continuing Prayut regime, economic sovereignty of the nation has not belonged to the Thai people.

13 minutes ago, Srikcir said:

Six months too late while BOT tried other futile measures to slow capital flight out of Thailand while preserving SET growth while admittedly sacrificing the export sector. For several years the BOT has sought in practicality to protect the reputation of the Prayut regime's economic policies ironically at the expense of the economic welfare of the people.  

"Thailand's growth has lagged most regional peers for years"

Those years being the entire duration of the Prayut military regime versus the three regional democratic economies! This reflects in part Prayut's true focus - advance the military strength (stranglehold ?).

• "in the five years the PM has been in power, total spending has hit 14.3 trillion baht, with loans of 2.2 trillion baht, without any significant growth in the economy." https://thethaiger.com/hot-news/politics/opposition-hits-out-at-governments-military-spending-in-2020-budget
• The Thai military during those five years spent of about 1 trillion baht, or 7% of the fiscal budget. https://www.thaipbsworld.com/tag/one-trillion-baht/
• 

Clearly, under the continuing Prayut regime, economic sovereignty of the nation has not belonged to the Thai people.

Excellent summary and the truth.  That is why I think thgat when the collapse happens they will not be able to control it - they have been propping up things deliberately - instead of allowing things to progress with small adjustments.  And anyone not thinking that this is being orchestrated and supported by their Chinese 'overlords' they are very much mistaken. 

24 minutes ago, Srikcir said:

Six months too late while BOT tried other futile measures to slow capital flight out of Thailand while preserving SET growth while admittedly sacrificing the export sector. For several years the BOT has sought in practicality to protect the reputation of the Prayut regime's economic policies ironically at the expense of the economic welfare of the people.  

"Thailand's growth has lagged most regional peers for years"

Those years being the entire duration of the Prayut military regime versus the three regional democratic economies! This reflects in part Prayut's true focus - advance the military strength (stranglehold ?).

• "in the five years the PM has been in power, total spending has hit 14.3 trillion baht, with loans of 2.2 trillion baht, without any significant growth in the economy." https://thethaiger.com/hot-news/politics/opposition-hits-out-at-governments-military-spending-in-2020-budget
• The Thai military during those five years spent of about 1 trillion baht, or 7% of the fiscal budget. https://www.thaipbsworld.com/tag/one-trillion-baht/
• 

Clearly, under the continuing Prayut regime, economic sovereignty of the nation has not belonged to the Thai people.

This is nonsense, military spending has been under 2% of GDP for the past five years, a level that is the global norm and is way below that of Thailand's neighbors.

Typically Thai...late to the party. Better late than never.